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Cottage-Sansum merger on track as anti-trust filing nears

By   /   Friday, October 11th, 2013  /   Comments Off on Cottage-Sansum merger on track as anti-trust filing nears

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Sansum Clinic’s planned merger with Cottage Health System remains on track despite the possibility that the partial government shutdown could delay an anti-trust review of one of the region’s biggest health care deals.

And the biggest physician group in Santa Barbara County says it hopes to be able to join the Covered California insurance exchange before the open enrollment period ends in March 2014. One advantage Sansum holds in negotiating for better reimbursement rates with Covered California’s narrow list of insurers in the region is that it already has as electronic records capability, a key element in the Affordable Care Act’s cost-control efforts.

During a phone interview with the Business Times, Dr. Kurt Ransohoff, CEO of Sansum, said the merger with Cottage remains on track after an October 1 deadline for due diligence for both parties passed with no red flags.

The next step, he said is filing for antitrust approval under the Hart-Scott-Rodino Act, which requires participants in large mergers to submit to Federal Trade Commission review. The FTC website remained locked up due to the partial shutdown. Ransohoff said it’s hard to predict how the shutdown could affect the filing and review.

He said he hoped by the time the filing was submitted it would be back to business as usual for the FTC. “It’s a pretty extensive process,” he said, adding that the timing of the filing “is in the hands of the attorneys.”

Ransohoff said he was surprised to hear from several of his own patients that Sansum’s physicians were not included among Covered California exchange providers.

He said part of the problem is that the exchange’s Pricing Region 12, which includes Ventura, Santa Barbara and San Luis Obispo counties, has only three insurers: Blue Shield, Anthem/Blue Cross and Kaiser Permanente, which serves Ventura County but not Santa Barbara County.  Negotiating reimbursement rates with Anthem and Blue Shield for Sansum’s physicians remains the sticking point.

He said some patients were being directed to the exchanges by insurers who were no longer offering individual policies except via Covered California. “I’m telling my patients to wait and see how things settle out. We are only five days into this,” he said.

A review of the Covered California website suggests there is plenty of room for Sansum and Blue Cross or Blue Shield to find an acceptable reimbursement rate. Unsubsidized exchange prices for a typical South Coast resident, a well-off individual, age 62, range from $719 per month to $1,031 per month. That is slightly higher for some coverage than a small business would pay for an individual in so-called PPO small group coverage in which Sansum participates.

Ransohoff blamed Covered California for chosing relatively narrow networks in building the offerings in Region 12 and in not building a physician search tool into the original exchange website. The tool was expected to be available beginning Oct. 7, but Ransohoff said the full extent of provider availability will take time to sort out.

“There should be greater clarity as time goes along,” he said.

Meanwhile, some 40,000 Sansum patients are getting the benefit of an electronic medical records system based on EPIC, software from a Wisconsin-based provider. The average age is 60, and patients are able to use the system to communicate directly with physicians as well as access their records. Electronic access is seen by many experts as the key to eliminating duplicate tests, reducing errors and driving greater efficiency in the system.

The University of California, which hopes to build its own large health care network, is also using the EPIC system, Ransohoff said.
Between negotiations to join the Covered California exchange, the Cottage Health merger and coping with the non-exchange pieces of the Affordable Care Act, “it’s hard to imagine a more busy time in health care,” he said.

And he remains bullish on the Cottage-Sansum merger. “We still think it would provide access to the most number of patients and the best service.”

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